Bear Stearns analyst Robert Peck put out a note recently that they think both Sirius and XM believe a proposed merger actually would pass regulatory approval.
But as we've all noticed, after the hype back in January, there appears to be very little buzz about the satellite radio merger as of late. This public slowing of the potential merger has hampered both stock prices (XMSR down about 25%, and SIRI is close to 52 week lows).
Peck further feels that the economics of the merged company is what is slowing down the public progress of the merger. But with the closing window of opportunity, both companies should "avoid quibbling over a few share points, to capture the much larger value of overall potential synergies."
The firm believes that the split of the merged company should go 55% in XM's favor, though of course both sides would probably argue over a higher percentage regardless, but this center point is appropriate "given the estimates in their model."
They think that upon the expectation of a successful deal, the ~$6-7B in synergies would take the value of XM's stock to ~$25, presenting significant upside potential.
Good find. Thanks for posting. How much time do you think they have left to try to do the deal Ryan?
I'd have to agree with Bob Peck in the sense of timing. He had a very indepth conference call on the merger synergies and timeline last month.
It would need to be wrapped up and approved by the Summer of 2008 - before election season really heats up.
The deal would probably take 12-15 months to complete, so that puts the window of opportunity to within the next 4-5 weeks.
Thanks Ryan. Mucho respect for covering the story even though you disagree with a potential merger. Good job.
Thanks, I really do appreciate that.
Some SatRad think this topic is overdone but I'm very happy it's being closey monitered here. This is a landmark possible merger (Boy I hope not) and it need to be followed closely..thanks Ryan.
Whether I agree with it or not, I'm still going to talk about it. Hell I'm a huge supporter of BOTH companies, but sometimes I'm also very critical of them (I wish everyone could see the amount of hate-mail I get as a result). Orbitcast is about ALL things satellite radio, and I feel very strongly about that. Sometimes it's good, sometimes it's bad. But no matter what, it's always relevant.
Who would take over who?
Would somebody be screwed out of a radio, if they did merge, or would they swap them out?
How could any subscriber of either provider be in favor of this merger? There is no way this merger can or should go through. Mergers are intended to expand operations and increase company profits. Consumer interest is not at heart during mergers. The profits would certainly increase for a satellite radio monopoly. The monopoly would be able to sell a lower quantity of goods at a higher price than companies operating in a purely competitive market.
And regardless of the timeline, the merger will be a huge up-hill battle for XM and Sirius. The FCC Chairman has come out against the merger. The Democrat-controlled Congress clearly will not favor a business transaction of this sort. The Justice Department will surely have something to say about anti-trust laws. There will be MAJOR pushback from consumers like us (C3SR – www.c3sr.org), government, and other industry entities.
F the Justice Department they have let the Cable companies do it for how long? They sue microsoft but comcast can go about doing what they are doing.
Thank god for FIOS. I guess better late than never.
Long overdue. The business model stopped making sense or cents about two years ago.
i agree muscle, good job as always ryan. i'm wondering if both companies combined would see black. i can only think of the music channels and news channels that would save money. i'm also thinking more and more that there is only so much content out there, and if there was no competition for this newly conjoined comapany, what is the worst result of a merger? the lack of competitive radio's? do you guys think a customer service issue would present itself? just thoughts.
The combination of Howard, NFL, MLB, Nascar, and Oprah makes a very powerful content offering to double the amount of subs that each company can offer being separate. Everybody talks about costs. This would be a revenue growth generator in the years to come (subs and advertising). Content is King. It may take some time but to me the real jewel in this potential merger is to combine the content.
People talk about the combination of content and the total number of subscribers without considering the fact that none of the current subscribers' radios are capable of receiving both signals.
Duh? Does the FCC and Justice department make the remaining company shut down if one of them goes belly up? Just wondering cuz of all the hype about the the anti-competitive nature of the merger.!!!!